SINGAPORE: Temasek Holdings has agreed to buy a 24.95 percent stake in A.S Watson in a deal worth around HK$44 billion (S$7.2 billion, US$5.7 billion), giving the Singapore investor a large foothold in Asia's consumer retail sector.
A.S Watson is part of Li Ka-shing's vast Hutchison Whampoa conglomerate.
A.S Watson is a large retailer with over 10,500 stores around the world.
Its flagship brand, Watsons, operates over 4,000 stores and more than 900 pharmacies in many countries including China, Hong Kong, Taiwan, Macau, Singapore, Thailand, Malaysia, the Philippines and Indonesia.
"With this investment, Temasek has increased its exposure to the consumer retail sector, with a balanced focus on a growing Asia and a recovering Europe," Temasek said in a statement on Friday.
Valued by analysts at more than US$20b, Watson is planning to open more than 1,200 new stores globally this year.
Temasek's stake in Watson would fit into its strategy of having exposure to companies benefiting from the consumer boom in emerging as well as developed markets.
Mr Chia Song Hwee, head of Temasek's Investment Group, said: "The consumer retail sector is a good proxy to growing middle-income populations and transforming economies. This is very much part of our investment themes as we shape Temasek's portfolio for the long term."
A.S Watson's audited net profit after taxation and extraordinary items for the financial year ended December 29, 2013 was around HK$7.8 billion, according to a filing on the Hong Kong Stock Exchange.
This is not the first time Temasek is dabbling in the consumer retail sector.
Consumer goods exporter Li and Fung - which, like Watson, is based in Hong Kong - is already one of Temasek's major portfolio companies.
Temasek has been looking to bulk up its presence in sectors like consumer, energy and technology.
This has been a busy two weeks for Temasek.
Last Friday, the investment firm made an offer to buy over all shares that it did not already control in commodity trader Olam International in a deal valued at US$2 billion.
The Temasek deal marks the end of a strategic review by Hutchison of its retail interests - which it announced in October - after scrapping plans to list its supermarket business Park and Shop.
The latest move by Asia's richest man comes somewhat as a surprise, as Hutchison had recently announced it was planning to go public with its A.S Watson retail business in a dual listing in Hong Kong and London.
It was expected to be one of the biggest listings of the year - estimated to raise some US$6 billion.
Friday's deal values Watson at about HK$177 billion or about US$22.4 billion.
The Li Ka-shing flagship will use part of the proceeds from the stake sale to pay a special dividend of HK$7 per share to its shareholders.
With the deal, Hutchison and Temasek have agreed to work together on a listing for Watson at a suitable time.
Mr Li was quoted as saying that he may consider a dual listing in Hong Kong and Singapore in two to three years.
He has been raising money by listing his portfolio companies in the last few years, including an IPO of his Hong Kong electricity assets which raised more than US$3 billion.